Wired thinks it's a good idea, Apparently there is a congressional report out on the subject. After going through the report, the CIA has decided to start BPO operations in Bangalore, to get with the times. Ok I made that last part up, but the report is real.

I can't believe this didn't get any attention at all in the Mainstream media. According to the AFP,

The Lakota Indians, who gave the world legendary warriors Sitting Bull and Crazy Horse, have withdrawn from treaties with the United States, leaders said Wednesday.

"We are no longer citizens of the United States of America and all those who live in the five-state area that encompasses our country are free to join us," long-time Indian rights activist Russell Means told a handful of reporters and a delegation from the Bolivian embassy, gathered in a church in a run-down neighborhood of Washington for a news conference.

A delegation of Lakota leaders delivered a message to the State Department on Monday, announcing they were unilaterally withdrawing from treaties they signed with the federal government of the United States, some of them more than 150 years old. [..]

The new country would issue its own passports and driving licences, and living there would be tax-free -- provided residents renounce their US citizenship, Means said.

The treaties signed with the United States are merely "worthless words on worthless paper," the Lakota freedom activists say on their website.

The treaties have been "repeatedly violated in order to steal our culture, our land and our ability to maintain our way of life," the reborn freedom movement says.
[link | More from Fox and USA Today]

Tax-free? nice. The Lakoites(?) will also distribute their own passport and driving licenses. Now possibly this is the work of a minority of activists (afterall they are descendants of Sitting Bull and Crazy Horse) trying to declare independence on their own. But it never cease to amaze me how other countries treat the notion of secession than ours.

It's probably to do with the fact that the threat of secession is more real here than other places, but in this year alone the Scottish National Party ran on a platform of independence and won that election. Nobody got shot, abducted or got over-worked up over it. But when the British High commissioner to Sri Lanka made these comments,

Let me be clear. I am not saying that the political aspiration for Eelam is illegitimate, any more than I would argue that the Scottish National Party’s goal of an independent Scotland is illegitimate. Similarly, I see nothing illegitimate in some crackpot demanding that Yorkshire or some other English county should become an independent state. What is crucial, however, is what methods are used by the SNP or the LTTE to achieve their goals. And the LTTE’s methods are simply unacceptable.

The media, the JVP, and other self-described patriots were screaming their heads off.

That's what Bandula Gunawardene wants you to eat next year.
From the bottom-line,

With the price of flour shooting up by Rs. 9 per kilo with immediate effect, Minister of Trade and Consumer Affairs Bandula Gunawardena yesterday demanded Sri Lankans not to rely on wheat flour instead, cultivate and consume more chick peas and green gram as an alternative to flour Reacting to the announcement from Prima, the minister told The Bottom Line that there was no point in taking legal action against the flour company again.

“Already three cases are pending in courts with regard to Prima irregularly increasing flour prices, sans approval from the Consumer Affairs Authority,” he said.

“So, until the court decides, we ask the public to cultivate grains and to eat chick peas and green gram,” Gunawardena said. (emphasis added) [link]

Sigh. There's a reminder that we haven't progressed much from the days when the government dictated what we have for lunch. So much for the "Open Economy". I wonder why the bright heads at the Ministry haven't figured out why there is a monopoly in the first place, here's a pointer - get rid of the consumer affairs authority. But wait, no wonder they wont figure that out, nobody likes being unemployed.

I was in India when the Nandigram incidents took place, it was around March and I was traveling all over North India. At the centre of the disputew were land acquisitions meant for a Special Economic Zone(SEZ), initiated by the West Bengal State Government (controlled by the Communist Party of India - Marxist, no less) for a chemical hub by a private company. The SEZ required the acquisition of 14,000 acres (57 km²) of land mostly from Nandigram. On this particular day (March 14, 2007) there was a standoff between policemen (some of whom were CPI(M) cadres in police uniform) and the villagers, ultimately resulting in 14 people being killed from police gunfire.

My work in India required me to be away from the TV most of the time, but I did manage to catch glimpses of the unfolding story and ever since I've kept a close-eye on news about SEZs.

Now, "Export Processing Zones" is hardly anything new , even Sri Lanka has what’s known as Free Trade Zones (FTZs). They are basically a designated area where the trade barriers are relaxed – tariffs lowered, duty slashed, etc. The area generally benefits from good infrastructure and what’s called an 'enabling environment' to promote exports and attract Foreign Direct Investment.

However SEZs, experimented quite extensively in India, China and elsewhere is a bit of a different animal. First of all they tend to be huge. Shenzhen – China’s first SEZ – spreads over a land area of about 334 km², that’s roughly about 9 times the city of Colombo. India, which now has approved nearly 400 SEZs in all of its states, has allowed for sites the size of 50km² for SEZs . So I repeat, they are HUGE, often covering the size of modern day cities. SEZs, like Free Trade Zones have relaxed trade rules, except they are more relaxed...much more relaxed. SEZs in India have been declared "foreign territory" for purposes of trade, duties and tariffs. They are exempt from customs, excise, service, Sales and local taxes. Most of them are run by private companies, including some foreign-owned ones. They have duty concessions on some imports, relaxed labor laws and the state government provides such services as electricity and water. I've seen some of them, they do look really pretty. So much so that Sri Lankan companies such as Brandix have invested in some of them.

On paper SEZs looks perfect - it would increase employment, help exports, encourage investment and provide a way for companies to escape illogical tariffs and taxes imposed on them and step into the world of free enteprise. Everything is great, except for the fact that setting up a SEZ involves land acquisitions, often forced on people not willing to move out from their property. This is where it gets messy, forcible land acquisitions creates a whole host of problems - displacement, inadequate compensation, loss of livelihood for the people involved to mention a few.

These issues have made SEZs a subject of much criticism from across the political spectrum. For the people on the left, this is part of the latest Capitalist conspiracy to satisfy their greedy lust for money at the expense of the poor. For the people to the right, its a violation of private property rights (see Shruti Rajgopalan's excellent critique here)- the one thing that's so critical to the effective function of the free-market system, that people like Hernando De Soto have written books about it.

Being a student of the subject I have met many people falling into both these camps, with one the one unified conclusion - SEZs are just bad. Except of course many people I've not met, including the Times of India columnist, Swaminathan Aiyar who has argued (here and elsewhere) that SEZs could be good thing, if handled properly. He recommends leaving the residential areas intact when developing the SEZs, and making affected people equity holders of the new projects, making the villagers landlords and companies their tenants. Quite a transformation.

Although, I'd principally defend property rights, I can back Aiyar's suggestions. So can the model be replicated in Sri Lanka ? Absolutely. Especially for a president, who like to harp on development and seems to want (genuinely or not I don't know) to develop both the South (primarily Hambantota) and the Eastern province, SEZs should definitely be a development tool which needs to be explored. Both provinces have natural ports and certainly the Eastern province can use a bit of accelerated growth.

Personally, I'd prefer Free Economic Zones, that is large designated areas with much like the rules of SEZs but not necessarily a privately managed chunk of land, a Hong-Kong experiment of sorts. Designated SEZs can still exist, of course. The East (in a world where a degree of rule of law is established) would be a perfect candidate for something like this. Trincomalee port can be made into a privately owned freeport. But now I'm just taking it a bit too far.. or is it?

Related Articles :

• How not to displace people (S. Aiyar)
• Indian Property Wrongs (Shruti)
• Free Cities
• The Hong Kong Experiment (Milton Friedman)
• SEZ FAQ